After four consecutive weeks of gains, BTC price sharply declined after reaching an all-time high of $108,353 on the 17th, quickly dropping to $92,232 within three days, with a maximum decline of 14.87%. Currently, with market sentiment gradually stabilizing, the price has recovered to around $94,000, entering a consolidation phase. The current support level for BTC price is around $92,000. Meanwhile, altcoins are suffering significant losses, with many token prices even dropping to levels seen before October, erasing the 'Trump effect' increase that followed Trump's election as US president (data sourced from Binance spot market, December 10, 17:00).
Although market trading volume has decreased, BTC spot ETF trading volume remains strong at an average of $4.4 billion per day, reflecting that market activity is still high. Moreover, on December 23, MicroStrategy was officially included in the Nasdaq 100 index, which may open the door for mainstream US funds to passively allocate BTC.
Market interpretation.
On October 23, all three major US stock indices rose, with the Dow Jones rising by 70 points and the Nasdaq increasing by about 1%. Due to the Christmas market closure, trading sentiment was muted on Monday, with 'BTC whale' MicroStrategy's stock price dropping by 8.8% due to BTC price fluctuations. The hawkish signals released by Powell have led to significant volatility in the stock market. However, considering the market's high expectations for the stimulus policies that the new US government is expected to implement, the stock market may stabilize after short-term fluctuations.
BTC has entered a year-end consolidation phase, and investors need to closely monitor the trends for key signals.
Last week, BTC experienced year-end consolidation, falling from a historical high of $108,353 to a local low of $92,000, with a maximum decline of about 15%. This BTC price correction was mainly due to short-term profit-takers achieving over 30% profit margin in this cycle, with some choosing to take profits, leading to a rapid increase in the probability of correction. Externally, factors include the Fed's interest rate cuts, the Trump effect, and MicroStrategy's BTC purchases, which have passed the initial strong phase and entered a pre-holiday resting period. Additionally, factors like the Christmas holiday, which significantly impacts BTC ETF, have contributed to BTC entering a correction phase.
The buying power game amidst the BTC sell-off may push prices toward new highs amid fluctuations.
The behavior of short-term and long-term holders has had a significant impact on price trends. According to the latest data from eMerge Engine under EMC Labs, a total of 268,581 BTC were transferred to exchanges this week, with short-term holders contributing 256,826 and long-term holders contributing 11,755. This marks the second-largest sell-off week since November.
Nevertheless, the buying power in the market, especially through funds from BTC ETFs, has successfully absorbed this selling pressure. According to eMerge Engine data, the BTC inventory on CEX has decreased by 27,901 this week. Additionally, the floating profit of short-term holders has dropped from a previous high of 33% to 25%, which is generally considered a neutral level in a bull market.
It is noteworthy that the sell-off volume from long-term holders, who have a decisive influence, has been declining consecutively. This suggests that BTC price is expected to correct above $100,000 and may gradually rise amidst volatility.
MicroStrategy has officially been included in the Nasdaq 100 and has increased its BTC holdings for seven consecutive weeks, supporting the long-term development of BTC price.
On December 23, MicroStrategy (MSTR.US) announced an additional purchase of $560 million in BTC at an average price close to BTC's historical high, marking the seventh consecutive week of BTC accumulation. According to documents submitted to the US Securities and Exchange Commission, MicroStrategy purchased 5,262 BTC at an average price of approximately $106,662 between December 16 and 22, which is the smallest purchase quantity in recent weeks.
During the same period, MSTR was included in the Nasdaq 100 index on December 23. Passive funds like QQQ (Invesco QQQ Trust, an ETF that tracks the Nasdaq 100 index) will be forced to automatically purchase MSTR, which in turn will allow MSTR to use these funds to buy more BTC.
The entire passive investment ecosystem of traditional finance will unconsciously buy more BTC due to MSTR being included in major indices, just as they are unaware that they hold NVIDIA stocks. Therefore, as long as MSTR continues to use these funds to buy more BTC, the buying pressure for BTC will continue to increase.
Macroeconomic dynamics.
The Fed's hawkish interest rate cuts have disrupted the market, leading to a 'Black Thursday' for cryptocurrencies.
On December 18, the Federal Reserve lowered the target range for the federal funds rate for the third time by 25 basis points to between 4.25% and 4.50%. Powell clearly stated that the timeline for controlling inflation is not as expected, and various economic data in the US is performing strongly. The Federal Reserve is very cautious about the pace of interest rate cuts next year. The market generally believes that the Fed will lower its interest rate cut expectations for 2025, reducing next year's cuts from more than three times to fewer than two.
At the same time, Powell stated, 'The Federal Reserve does not allow holding BTC and is not considering participating in a government BTC reserve program.' The Fed's hawkish shift has also suppressed the speculative sentiment released by Trump in the crypto market.
Affected by the uncertainty of the Trump administration, US consumer confidence experienced its first decline since March in December.
According to data released by the World Large Enterprises Alliance on Monday, the December consumer confidence index fell to 104.7, below the market expectation of 113.2, reaching the median level of the past two years. The confidence index among consumers aged 35 and above has declined.
Consumers are not very optimistic about business conditions and their own income prospects. Indicators measuring expectations for the next six months and current conditions have both declined, which may further affect the market's confidence in a soft landing for the US economy.
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